Given Amazon’s dominance and the fact that Prime members receive free shipping, there is a perception that every shopper receives free shipping on every purchase. Internet Retailer and Toluna surveyed 969 online shoppers in March to assess their free shipping behavior and put it in context for retailers. Shipping costs are significant for many retailers and they constantly weigh free shipping tradeoffs knowing the shopper’s disdain when it comes to paying for shipping. They must make decisions to serve up offers based on profitability objectives and bottom-line implications. Simultaneously, an exploration of other ways to extend free shipping as a benefit should always be in consideration as its niche appeal can help convert customers.
Contrary to popular belief, shoppers often incur shipping charges when placing online orders and on average on average they pay for shipping on 20% of their orders. One in three shoppers reports paying for free shipping on at least half of their orders while seven in 10 pay for free shipping on the majority (10% or more of their orders)
Unconditional free shipping is always in favor when it comes to online buying. Shoppers vote with their pocketbooks and 64% of online shoppers rank unconditional free shipping in the top-2 when it comes to online shopping selections with almost half assigning it the #1 rank. While unconditional free shipping is always the preference, I was surprised to see “Free shipping on 1000’s of products” garner a top-2 ranking (38%) among those surveyed. More retailers appear to be adopting this methodology to counter Amazon and others in hopes of doling out unconditional free shipping.
We are also reviewing the Internet Retailer Top 1000 retailers to understand their shipping policies. This review is focused on year-round policies rather than one-off promotions though we appreciate that this is an important lever when influencing shopper behavior. With Walmart, Target and others instituting free shipping on thousands or even tens of thousands of products, they are attempting to let shoppers know that they are competitive. Of course, they are also in a unique position to leverage their brick and mortar stores for buy online pickup in store where free shipping is part of the package. Other retailers adopting this policy include Footlocker, Focus Camera, SpaceBound, Abt and ArtVan Furniture.
Retailers are in the conversion business and pushing shoppers to pay for shipping can be an order inhibitor. When free shipping is not an option, 68% of shoppers refrain from completing half or more of their orders and almost all of the shoppers (91%) have not placed an online order when free shipping was not offered at some point. They may choose to go to a competitor or simply forego making a purchase until that offer is dangled before them.
Marketplace sellers face similar challenges, as a lack of free shipping can be an inhibitor there as well. Marketplace behavior mirrors that of online retailer purchasing when it comes to a lack of free shipping keeping 60% of shoppers from completing half or more of their orders as compared to the 68% from online retailers. On a side note, nine percent of online shoppers surveyed have not placed an order from an online retailer or marketplace because free shipping was not available.
The positive findings are that online shoppers will pay for free shipping under the right circumstances:
- 46% paid for shipping when they wanted the order
- 45% reviewed the order based on its overall value factoring in free shipping and ultimately paid for shipping
- Single site availability caused 36% to pay for free shipping
- 28% had logistical reasons for paying for free shipping
Shoppers wisely look at the total cost ownership (TCO) when deciding to pay for free shipping. Personal circumstances is also an important factor in one’s willingness to pay for free shipping. Most importantly though, when shoppers must have a product, they are often simply willing to pay for shipping.
Knowing that many retailers are not in a position to offer free shipping, we have also been investigating other tactics retailers can employ to convert customers. Those tactics include no fee rewards programs, paid membership programs ala Amazon Prime and proprietary credit cards that may extend free shipping as a benefit. As our chart indicates, no fee rewards programs see the greatest interest when shoppers are looking to get free shipping. One in two (54%) have signed up for a no fee rewards program to receive free shipping trailed closely by the 47% who have taken advantage of similar paid membership programs. Credit cards have other dynamics in play and as a result only 30% of shoppers have signed up for a credit card while half have been tempted by rewards programs in order to get free shipping. We can only conclude that shoppers will evaluate any and all options to get free shipping.
No fee retail rewards programs that offer free shipping command the attention of online shoppers. The majority of online shoppers (54%) have signed up for a no-fee rewards program to gain free shipping while 38% of online shoppers have signed up for just 1 or 2 programs. Online shoppers may be willing to pay for memberships that incorporate free shipping into their benefit structure having been trained by Amazon. From a paid membership perspective, 47% of online shoppers have signed up for one in order to secure free shipping yet half of those who have taken advantage of such programs have typically signed up for only one program. Credit cards that offer free shipping as a benefit see limited traction relative to other loyalty programs as only 31% of online shoppers have signed up for a credit card in order to get free shipping. This suggests that shoppers must have very strong interest in a brand to sign up for a credit card just to get free shipping
Online shoppers will aggressively look to save money when shopping online. They will be vigilant in their hunt for free shipping evaluating options that span the gamut from free and paid membership programs. In the end the customer will still pay for shipping when circumstances suggest they must have their merchandise.Favorite